Beacon Technology Retail- Opportunities and Risks

Beacon Technology Retail- Opportunities and Risks

In recent years, the beacon technology and the associated service “location-based customer approach” for hypermarkets have been hyped. But in the past two years, beacon technology retail has been quite. So the question arises: what happened to the hype surrounding beacon technology in stationary retail? Jonas Hellweg investigated this question as part of his thesis at the Georg-August-University Goettingen. He summarized the most important findings for Location Insider.

Due to the low level of research literature, that deals with the acceptance of beacon technology retail, it made sense from a scientific perspective to take a closer look at the topic. In particular, research has so far neglected the acceptance of beacon technology from the retailer’s perspective. In my research work, this research gap is addressed and knowledge about the acceptance of the use of beacon technology is gained from the perspective of retailers.

The constantly available Internet, as well as the radio technologies integrated with the devices such as Bluetooth, GPS, and NFC, enable digital interfaces between stationary retail and the end customers. This leads to a change in customer buying behavior (see Singer, M. (2016): Online goes offline in modern retail and Statista: Share of smartphone users in Germany in 2017), to which brick-and-mortar retail is responding with new business models and services. One of these innovative services is the location-based customer approach, also known as “location-based services”, which can be made possible by beacon technology.

Beacon technology retail Benefits 

For beacon technology retail, the application must be beneficial for companies. In addition to end-user acceptance, the acceptance of retail is an essential prerequisite for the success of beacon technology.

With regard to the benefits of beacon technology, the “customer loyalty and enthusiasm”, “real-time marketing”, the “perceived usefulness of location-based services” and the “cost-benefit ratio” were identified. According to research literature, beacon technology has a superior cost-benefit ratio compared to alternative technologies.

Three retail companies were interviewed for scientific work. Here, retailers’ expectations of beacon technology could be divided into two target aspects. On the one hand, measurable increases in sales were expected directly in key figures by luring customers into the business through geofencing and by pushing messages to promotional products (hard factors of benefit). On the other hand, it was expected that the orientation needs of the customer would be covered by the offer of “indoor navigation” and thus perceived as an added value. This, in turn, should lead to increased customer satisfaction and loyalty, which, according to the Service Profit Chain, is a driver of customer loyalty (soft factors of benefit). Loyal customers should have a positive impact on company growth and profitability.

Beacon technology retail

Beacon technology retail expectations are not realized

However, beacon technology retailers’ expectations could not be met due to an insufficient number of users. But why did the number of users of location-based services fall short of retailers’ expectations?

According to Davis “Technology Acceptance Models” (TAM), the “perceived usefulness” and the “easy usability” of technology should be given and visible to the user in order to be accepted. However, the providers tried to reach as many customers as possible with the use of location-based advertising (LBA) in order to increase the sales of the provider. The “perceived usefulness” was not apparent to the customers. For example, location-based advertising was sent to customers via push messages, which was perceived as a nuisance. Already with the introduction of the “iBeacon” standard, Apple warned of the danger of bothering customers with too many push messages in the form of advertising.

Another challenge in accepting location-based advertising is ensuring an accepted upper limit for advertising contacts. It is also critical to question when the customer has a need for orientation. After all, the “perceptible benefit” for indoor navigation is only apparent to customers if they have a need for it. In addition, the accuracy of the location determination through beacon technology poses a challenge for user acceptance.

There is disagreement among the experts surveyed about the evaluation of the costs with regard to the acquisition, introduction, and maintenance of the beacon technology retail. One of the interviewees perceived the costs of beacon technology retail as too high for the benefits provided. In general, the number of users is relevant for the calculation of the cost-benefit ratio. Less than expected use of beacon technology drives up the cost per user.

The fulfillment or non-fulfillment of the expected benefits for the beacon technology on the part of the retailers, in addition to the cost aspect and the technical implementation, has a direct impact on the acceptance of the beacon technology retail.

Risks:

One risk of using location-based services is that the customer perceives no benefit for the service offered. If one or more relevant factors of the use of a location-based service (LBS) are not met, the user will not perceive any benefit. As a result, they will not accept the service.

The “location-based advertising” application serves as an example of this since no benefit is perceptible to the customer.

Thus, the benefit of the provider is missed because his advertising messages do not reach the customers. The offer of “indoor navigation” only provides a benefit if there is a need for this on the part of the user. The consequences of a drop in the number of users are dramatically rising contact costs. This harbors the risk of higher investment risk. In addition, other possible uses cannot be realized as a result (for example, “Analytics”). Another risk for the benefit of beacon technology can be high failure rates, maintenance requirements and inaccuracy of location localization.

Opportunities

The beacon technology retail offers various possible uses of location-based services. It should be noted that the service provides the user with a noticeable benefit. By offering location-based services, customer satisfaction and thus customer loyalty can be increased. According to the Service Profit Chain by Heskett et al. this should lead to an increase in the company’s sales growth.

Let’s take an example of the orientation needs of customers at the airport.

In this case, the needs of the user can be met by offering “indoor navigation”. The service fulfills all relevant benefit factors in order to deliver a perceptible benefit to the customer. This means that customers can accept the technology and plan the contact costs with a constant number of users. In addition to the main benefit, other location-based services such as “Analytics” can be used. Another opportunity is the possibility of reducing costs in facility management, in which the vehicle fleet and machines can be localized and planned more efficiently.

Action recommended

I recommend a careful analysis of the use of location-based services on the part of the customers.

The benefit is the basic requirement for the acceptance of beacon technology retail. Acceptance can arise if the predefined expectations of the technology are met. The perceived benefit of beacon technology plays a critical role.

Retailers that focused on the hard benefits were unable to meet the expectations for technology adoption. Whereas tracking the soft factors of benefit led to expectations being met.

In the age of the “Internet of Things”, location-based services will certainly be discussed even further in the future. It remains to be seen whether beacon technology will remain the technical standard for implementing “indoor” location-based services.

The task in future research activities is to analyze the acceptance of an upper limit for advertising contacts via location-based advertising (frequency cap) and to design concrete solutions.

There is also the question of whether the possible uses of location-based services should be advertised more in order to illustrate the added value of the service to potential users.